The Philippine economy expanded 7.4 percent in the second quarter following the revised 8.2-percent expansion in the first quarter and 12.1 percent a year ago, despite the impact of high global commodity prices caused by the Russia-Ukraine war and supply chain disruptions in China.
“Timely changes in COVID-related policies, such as easing alert levels, removing tourism restrictions, and accelerated vaccine rollout, helped increase economic activities. As of June 2022, around 85 percent of the economy was already under Alert Level 1. That these changes were implemented during the recently-held national and local elections demonstrate that, indeed, ‘living with the virus’ is possible,” Economic Planning Secretary Arsenio Balisacan said Tuesday.
Balisacan said the second-quarter gross domestic product growth of the Philippines was the second fastest in the region, next to Vietnam’s 7.7 percent. It was faster than Indonesia’s 5.4 percent and China’s 0.4 percent.
Economic growth averaged 7.8 percent in the first half, above the 2022 target range of 6.5 percent to 7.5 percent set by the government.
National statistician and civil registrar general Dennis Mapa said in an online briefing the agriculture, forestry and fishing sector posted a 0.2-percent growth in the second quarter, while the industry sector expanded 6.3 percent. The services sector grew 9.1 percent.
He said that on the demand side, household final consumption expenditure grew by 8.6 percent in the second quarter while government final consumption expenditure went up 11.1 percent. Gross capital formation increased 20.5 percent; exports of goods and services, 4.3 percent; and imports of goods and services, 13.6 percent.
The manufacturing sector’s growth decelerated to 2.1 percent in the second quarter from 22.4 percent in a year ago on weaker growth in computers, electronic and optical products, chemical and chemical products and food products.
Finance Secretary Benjamin Diokno said the growth target remained on track. “While [there] might be some slowdown in growth in the second half of the year, reflecting the downgrade in the outlook for the global economy, we still expect the DBCC [Development Budget Coordinating Committee] growth target for 2022 will be achievable as we continue the ongoing infrastructure program, maintain macroeconomic stability and take advantage of the recently approved amendments to the PSA[Public Service Act], FIA [Foreign Investment Act] and RTLA [Retail Trade Liberalization Act] to foster investment-led recovery,” Diokno said.
Balisacan said the economy should grow by 7.2 percent in the second half to achieve the upper end of the target range of 6.5 percent to 7.5 percent for the year. To achieve the lower bound of the target range, the economy should grow by 5.2 percent in the next six months, he said.
Net primary income from the rest of the world grew by 64.8 percent, enabling the gross national income to grow by 9.3 percent in the second quarter.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said higher long term and short-term interest rates locally and globally in the coming months would be a drag on economic growth as “higher borrowing costs/financing costs would also reduce the growth in new investments, expansion plans, and purchases of big-ticket items such as real estate/property, vehicles, capital equipment, among others.”
“Higher interest rates would also increase the interest expense of consumers/households, businesses, government, and other institutions that would otherwise have been spent on consumption, new investments, job creation, among others,” Ricafort said.
Ricafort said among the risk factors for GDP data in the coming months would include delayed effects of higher inflation, especially any remaining second-inflation effects after higher minimum wages and transport fares from June to July and the resulting pass-on effects in terms of higher prices of other goods and services in the economy.
Balisacan said the full reopening of the economy would generate more income-earning opportunities. “But the purchasing power of that income may be eroded by the high inflation, primarily resulting from increased fuel and food costs. Consequently, the government is focused on ensuring food security and reducing transport, logistics, and energy costs,” Balisacan said.
The economy grew by 5.7 percent in 2021, a turnaround from the 9.6-percent contraction in 2020.